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2017 (12) TMI 1463 - AT - Income TaxRevision u/s 263 - addition of gifts - proceedings u/s 153A - Held that - Since no information relating to the impugned gifts was found during the course of search the Assessing Officer could not have made any addition vis- -vis the said gifts in the order passed u/s 153A and, therefore, the Ld.Pr.CIT cannot now hold the order of the Assessing Officer as erroneous for not making addition on account of the same. The Hon ble Delhi High Court in the case of CIT vs Mahesh Gupta(2016 (12) TMI 684 - DELHI HIGH COURT) has in identical factual matrix, where the order sought to be revised was passed u/s 153A and the addition sought to be made was not based on any incriminating material found during search, held the assumption of jurisdiction by the CIT u/s 263 as bad - Decided in favour of assessee.
Issues Involved:
1. Assumption of jurisdiction under Section 263 of the Income Tax Act. 2. Validity of addition of gifts received by the assessee under Section 56 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Assumption of Jurisdiction under Section 263 of the Income Tax Act: The primary issue in this appeal is whether the Principal Commissioner of Income Tax (Pr.CIT) was justified in invoking Section 263 of the Income Tax Act to revise the assessment order passed under Section 153A. The assessee argued that the original assessment was completed, and no incriminating material was found during the search to justify the addition of gifts received. The Pr.CIT believed that the assessment order was erroneous and prejudicial to the interests of revenue because the Assessing Officer (AO) failed to tax the gifts received under Section 56. The Tribunal noted that the assessment for the relevant year was completed before the search, and no incriminating material related to the gifts was found during the search. Citing several judicial precedents, including CIT vs. Kabul Chawla and Pr.CIT vs. Mahesh Kumar Gupta, the Tribunal held that in cases of completed assessments, additions under Section 153A can only be made based on incriminating material found during the search. Since no such material was found, the AO could not have made the addition, and therefore, the Pr.CIT's assumption of jurisdiction under Section 263 was invalid. 2. Validity of Addition of Gifts Received by the Assessee under Section 56: The second issue pertains to whether the gifts received by the assessee amounting to ?15 lacs should be taxed under Section 56. The Pr.CIT directed the AO to enhance the income of the assessee by ?15 lacs, arguing that the gifts were taxable. The assessee contended that the gifts were received from a Hindu Undivided Family (HUF) and were exempt under Section 56(2)(vi) as they were from relatives. Given that the Tribunal already held the assumption of jurisdiction under Section 263 to be invalid, it did not delve into the merits of this issue. However, it noted that the Pr.CIT's order did not mention any incriminating material found during the search related to the gifts, which further supported the conclusion that the AO's original assessment was not erroneous. Conclusion: The Tribunal concluded that the Pr.CIT erred in assuming jurisdiction under Section 263 of the Income Tax Act to revise the assessment order passed under Section 153A, as no incriminating material was found during the search. Consequently, the appeal of the assessee was allowed, and the order of the Pr.CIT was set aside. The Tribunal did not find it necessary to address the merits of the addition of gifts or other legal grounds raised by the assessee, as the invalid assumption of jurisdiction was sufficient to dispose of the appeal.
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